WEAK demand could characterize Treasury Bills sale on Friday following low yield despite an increase in year-on-year inflation in June 2018.

Government is seeking to auction GH¢528 million T bills tomorrow August 10, 2018, to be issued on Monday August 13, 2018.

However, it only managed to raise GH¢342.86 million, from a target of GH¢414.00 million for last week. This is compared with the GH¢1.044 billion raised two weeks ago from a target of GH¢1.041 billion.

Overall, government borrowing from the domestic market has slowed down this year as government aims to reduce the fiscal deficit from an estimated 6.0 percent in 2017 to 4.5 percent in 2018, buoyed by the introduction of new tax measures in the mid-year budget to boost revenue generation.

The yield on the 91-day bill remained unchanged at 13.31 percent whiles the 182-day bill softened marginally by 0.01 percent to 13.82 percent last week as against 13.83 percent the previous week.

According to the Banking Sector Report May 2018, short term bills have declined from 72.0 percent in April 2017 to 55.2 percent in April 2018. It however remained the largest component of banks’ investments but signaled that investors are looking for opportunities in other non-bank financial institutions where yield are high on time deposits.

Government strategy going forward is to borrow instruments with long term maturity in order to pay less coupon rate. So far, it has been successful in raising US$ 1 billion 10-year bond at 7.627 percent interest and US$ 1 billion 30-year bond at 8.627 percent.

Government has so far reduced yield on short term securities drastically from a high of about 18 percent in 2017 to about 13 percent in 2018.

Comparing the first 22 weeks of 2018 against 2017, data reveals a drastic reduction in government’s interest in local debt whilst re-profiling the entire debt portfolio in order to reduce interest payment on the instruments borrowed. For, instance, government targeted GH¢22.35 billion in the first 22 weeks of 2018 as against GH¢35.33 billion in 2017, whilst raising GH¢21.08 billion in 2018 compared with GH¢34.28 billion in 2017. In all, investors tendered in GH¢21.22 billion in 2018 as against GH¢37.96 billion in 2017.

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